Where have
all the soldiers gone?
Long time
passing
Where have
all the soldiers gone?
Long time
ago
Where have
all the soldiers gone?
Gone to graveyards
every one
When will
they ever learn?
When will
they ever learn?
– Pete Seeger

Most Americans
think the federal government better reduce its $14 trillion debt or
else collapse. But to make a dent in the debt, Washington has to divert
large chunks of tax revenues from government services. Government agencies
will have to fight for scraps. The leftovers will go to
programs like food stamps for hungry kids.

One government
service, however, towers above the fray. National defense consumes
more public resources than any other federal program. Every
year Congress and the president hand the Department of Defense (DOD) and a
couple of other agencies more than a trillion dollars for
military, defense, homeland security, spying, and related activities
“to keep the nation safe,” as explained by President Obama’s National Commission
on Fiscal Responsibility and Reform.
Yet the Pentagon and its affiliates are shielded from the budgetary
ax being waved at every other federal agency and program. True to form, on May 25, the House of Representatives, by a four-fifths majority, authorized $690 billion for DoD alone in 2012.

The DOD, however,
is getting more than just immunity from any serious appropriations cuts.
Despite claiming to be in the grip of an unprecedented national debt
crisis, the Washington establishment is planning to give the Pentagon
several trillions of dollars over the next six years and not require
it to account for a single penny.

The Pantomime
Defense Cuts

The competing
budget proposals getting any consideration by lawmakers pay lip service
to “cutting” defense spending. But they do nothing of the
sort. All of the savings plans maintain a massive defense budget for the foreseeable future. For the next several
years, as much as a quarter of all annual appropriations will continue
to flow from Treasury to Defense, undiminished and unimpeded.

It is a fantasy
that the national debt can be brought under control without radical
down-sizing of defense spending. But the defense cuts in proposed
budget plans are either piddling or make-believe. Early on, Secretary
of Defense Robert Gates’ highly publicized five-year plan called for
$78 billion in DOD budget cuts. If it were real, the “cuts”
would amount to no more than 1.5 percent of projected
growth. But, as even the corporate
media admitted,
Gates’ “cuts” were not real. They were hypothetical “reductions”
from hypothetical increases.

The anachronistically titled
“Moment of Truth” report issued in December 2010 by the Bowles-Simpson
panel (aka the National Commission) has also significantly influenced
the budget debate. The commission boasted saving $1 trillion in defense
costs over an eight-year period. Once again, the “savings” were mostly
fictional. “Moment of Truth” reflected the difference between Obama’s
eight-year plan and the commission’s lower number. As Obama’s numbers
derived from Gates’ flawed assumptions, the commission’s projections
overstate “savings” by the same amount. Bowles-Simpson in fact proposed
$6.1 trillion for defense and security spending and had the gall to
call that a “cap.” The “cap” had a howitzer-sized hole in the top. If
money is needed for an actual military conflict, the Pentagon could tap
the Treasury for what Bush/Cheney called “supplementals”—special
appropriations simply excluded from defense budgets. The commission
rechristened this as “overseas contingency operations” (OCO)
spending—that is, Afghanistan and Iraq, the two longest “operations” in
U.S. history. It said:

Discretionary
spending constraints must not ignore spending for the conflicts in
Iraq and Afghanistan and other future conflicts. At the same
time, budget rules should not determine war policy….
Spending for OCO would not count against the general security spending
cap….

A round up
of Washington’s aversion to defense-spending cuts would not be complete
without the “People’s
Budget” from
the congressional Progressive Caucus. The “People’s Budget”
makes all the right noise. It taxes rich people, protects
“entitlement” programs, ends OCO spending and current OC “operations,”
and specifies cuts and reductions in military programs, overseas bases,
and so on. What it does not do is significantly pull back
on defense/security growth or come close to erasing its bloated spending.
The “progressive” “People’s Budget” envisions DOD appropriations alone to come to
about $526.6 billion by 2016 (2.8 percent of projected GDP) and to about $585
billion by 2021 (2.4 percent of GDP)—numbers that exceed the Bowles-Simpson
recommendations. If they are anywhere, “progressives” on military
budgets apparently are not in Congress.

Defense
spending is responsible for America’s financial condition. Logically,
it is the first place to look for “waste, fraud, and abuse” and plain
old throwing money away. There is a colossal variance between
legitimate defense and security objectives and the resources appropriated
for them. Is al-Qaeda, America’s only official enemy, or indeed
all of “militant Islam,” truly a $1-trillion-a-year threat to the
“homeland?” Al-Qaeda spends at
most
$300 million a year on terror—probably much less. In other words, the
enemy’s terrorism budget is 0.003 percent of what the U.S. pays to
secure the realm. For every $300 the enemy spends for its undeniably
sinful purposes, the U.S. spends $1 million putatively in response.
“Asymmetrical” does not begin to describe the economics of this
warfare. In any case, at a trillion or so dollars a year, the
defense/security cluster mostly exists for its own sake, not for
defense or security or to fight al-Qaeda.

Demonstrating
its grip on Washington, the military’s lead role in increasing America’s
debt barely rates any mention. If the process were rational, that
circumstance would be front and center in the debt-reduction debates.
Instead, it is largely ignored.

The Black
Hole

The deepest,
ugliest problem is not the amount of American wealth that defense/security
gulps down its maws every year. It is that nobody—the Pentagon
included—has the foggiest idea where the money goes.

The Pentagon
may be shaped like a star, but it behaves like a black hole. For
decades, trillions of American taxpayer dollars taken for defense have
vanished. The money goes in, but information on what was
done with it never comes out.

The reason
is no mystery. The DOD does not have anything that resembles a
coherent set of books and records of account. It lacks what almost
every mom-and-pop store or bait-and-tackle shop in the country has—an accounting system.

Although it
is equivalent to the largest corporation on Earth, the DOD does not
have a functional accounting department. It cannot prepare financial
statements. It is incapable of balancing its books. In fact,
it does not have “books,” in the sense of a system to summarize
its economic activity in assets and liabilities, income and expenses,
cash flows, and so on. Its accounting “records” are the equivalent
of an aircraft-carrier-sized shoebox of receipts.

This is not
some new development or a hiccup from the Bush-Obama era of bellum
Americanum. It has been going on for decades. The DOD
has had to admit every year for at least the last 20 years that
it cannot create financial statements that bear any connection to reality.
In its 2010 financial report,
for example, the Defense Department’s chief financial officer admitted
(18): “DOD financial management suffers from enterprise-wide
problems with systems and processes, and the lack of auditable financial
statements is one manifestation of these problems.” His predecessors
have made the same annual admission since at least since 1991, when
Congress passed the Chief Financial Officers Act. That law requires
the major federal agencies to produce annual financial statements that
comply with generally accepted accounting principles. The
Pentagon has never come close. Thus, the DOD’s Inspector General’s
Office, responsible for trying to audit the department, reported this
year, as is has time and again in years past:

Prior
audits have identified, and DOD has acknowledged
… long-standing material internal
control weaknesses…. These pervasive material weaknesses may affect
the reliability of certain information contained in the Basic Financial
Statements. Therefore, we are unable to express, and do
not express, any opinion on the Basic Financial Statements.

In CPA-speak,
this is called a “disclaimer,” meaning that the accountants
cannot trust the information they were given to examine the financial
statements.

The DOD’s
financial-record disaster has become so overwhelming that DOD auditors
essentially have given up. In a report released in September 2010, Sen.
Charles Grassley’s staff detailed the demoralization among Inspector
General auditors faced with the futile task of auditing guess-work-based
financial statements supported by nonexistent books and records.
According to Grassley’s report, “the quality of Defense Department
data presented to auditors should probably be rated as poor to nonexistent.
The consequences are predictable. Auditors consistently report ‘no
audit trail’ found. … [That] means that critical supporting documentation
and data are missing. Vital records are not available for audit. Money
has been paid out—but for what?” In short, DOD’s statements
aren’t just wrong: they are so full of holes
that auditors do not have the information necessary to determine
just how distant from reality they truly are.

A Constitutional
Scandal Ignored

Given its dominant
size, the Pentagon’s unintelligible financial data necessarily destroys
any effort to compile and report accurate financial information for
the United States government generally. As a result, the Government Accountability
Office (GAO) has been unable to audit the consolidated
financial statements of the United States since it first tried to do
so in 1997. Each year, the GAO has been forced to issue the same
sort of “disclaimer” that DOD auditors issue—that “material weaknesses
in internal control and in selected accounting and financial reporting
practices have prevented GAO from expressing an opinion on the [United
States government’s consolidated financial statements].” The GAO
most recently explained the recurring fiasco in a December
2010 press release, stating that it “cannot render an opinion on the
2010 consolidated financial statements of the federal government, because
of widespread material internal control weaknesses, significant uncertainties,
and other limitations…. The main obstacles to a GAO opinion were:
(1) serious financial management problems at the Department of Defense
(DOD) that made its financial statements unauditable….”

The DOD’s financial
opacity effectively has precluded the United States government from
complying with the Constitution. Article 1, section 9, clause 7, states

No
money shall be drawn from the Treasury, but in Consequence of Appropriations
made by Law; and a regular Statement and Account of Receipts and
Expenditures of all public Money shall be published from time to time.

The DOD’s books-and-records disorder has effectively precluded any “regular Statement
and Account of Receipts and Expenditures of all public Money.” Moreover,
the Constitution’s adopters clearly intended for Congress to ensure
a regular statement of account “from time to time” in order to exercise
its “power of the purse.” While one can argue that “from time
to time” does not mean annually, the phrase most certainly does not
mean “never.” Clause 7 does not empower Congress to appropriate
money from the Treasury if it is in chronic breach of its duty to provide
regular and periodic statements of account. When it comes to the DOD,
however, the Constitution frequently is avoided rather than obeyed.
So it is here. Congressional appropriations are routine, notwithstanding
that, due to the DOD’s dysfunctionality, a “regular” (i.e., accurate)
financial statement of the government hasn’t been made in decades.

The United
States’ chronic disregard of the “receipts and expenditures”
clause is, or should be, a national scandal. In a dissenting opinion in a 1974 case, Justice Douglas
described the significance of this constitutional command to American
democracy. “From the history of the clause it is apparent that
the Framers inserted it in the Constitution to give the public knowledge
of the way public funds are expended…. The public cannot intelligently
know how to exercise the franchise unless it has a basic knowledge concerning
at least the generality of the accounts under every head of government.”
Yet it appears to have gone largely unnoticed that the government follows
a de facto policy to deny the public a regular statement of receipts
and expenditures but to tax and spend in direct violation of the Constitution.

Same As
It Ever Was

Despite current
inattention, the DOD’s financial chaos is no
secret. Nor
has it been free from criticism, including occasional aggressive attacks
from establishment insiders. For years, Grassley and several other
Washington regulars with solid pro-military credentials have loudly
berated the DOD’s accounting muddle—including Defense Secretary
Donald H. Rumsfeld, who presided over the services’ greatest growth
and bloodletting in the post-World-War-II period. On Sept. 10,
2001, Rumsfeld told
a Pentagon press conference
his department could not account for transactions amounting to 40
percent of the comparatively small $5.6 trillion in gross U.S. government
debt. “We are, as they say, tangled in our anchor chain,”
Rumsfeld said. “Our financial systems are decades old.
According to some estimates, we cannot track $2.3 trillion in transactions.
We cannot share information from floor to floor in this building because
it is stored on dozens of technological systems that are inaccessible
or incompatible.”

Rumsfeld’s
astounding admission was not the whole truth. A few months
earlier, the DOD’s deputy inspector general had testified in Congress that, to get the DOD’s numbers
to balance, the accountants had to book $7.6 trillion in “adjusting
journal entries” for the 1999 financial statements, $2.7 trillion
of which had no support. An “adjusting journal entry” often
is just a plug to get numbers at balance or add up. In other words,
in one year alone, the DOD basically had to guess about the disposition
of a sum of money larger than the national debt.

More recently,
Oklahoma Republican Sen. Tom Coburn, seldom mistaken for a military-bashing
left-winger, laid out the Pentagon’s chronic “problems” in a letter to Obama’s Bowles-Simpson commission:

[T]he
Pentagon doesn’t know how it spends its money. In a strict financial
accountability sense, it doesn’t even know if the money is spent. This
incomprehensible condition has been documented in hundreds of reports
over three decades from both the Government Accountability Office (GAO)
and the Department’s own Inspector General (DOD IG). In a depressing
and little-noticed report, the Pentagon Inspector General reported the
following in its “Summary of DOD Office of the Inspector General Audits
of Financial Management”…

DOD frequently enters
“unsupported” amounts in its books and uses those imaginary
figures to make the books balance…

DOD managers do
not know how much money is in their accounts at the Treasury, nor when
they spend more than Congress appropriates to them…

DOD does not know
who owes it money, nor how much….

DOD’s “Internal Controls,” intended
to track the money, are inoperative. Thus, DOD cost reports and financial
statements are inaccurate, but the size, even the vector, of the errors
cannot be identified because the data cannot be verified.

Coburn then
posed the $64 trillion question: “If we have a system that
does not accurately know what its spending history is, and does not
know what it is now how can we make a competent, honest estimate of
future costs? No failed system can be fixed if it cannot be accurately
measured.”

Notwithstanding
Coburn’s “incomprehensible” but undeniable facts, the
Bowles-Simpson group essentially recommended business as usual, giving
the Pentagon unlimited access to the Treasury without imposing any accountability
on it.

The DOD has
responded to this and other criticism by investing much time and money
maintaining an appearance of endless “reform.” Since at least
1986, DOD has proffered one “reform” plan after another to straighten
out its record-keeping anarchy. Every plan has failed. As
soon as one plan fizzles out, the Pentagon concocts a new one.
The end goal of these Phoenix-like reforms has been to create auditable
financial statements by some future date. Like Zeno’s arrow, however, the reforms are forever
in “process” with no discernible progress. And then there
is the money that has been spent on the numerous “reforms” themselves.
Nobody knows what has happened to that either. In a 2004 piece in CFO Magazine, Kris Frieswick reported
that, not only had every reform program eventually faded away with little
or nothing to show, but also “no accurate accounting exists of what
was accomplished or how much was spent on the initiative.”

There has been no improvement in recent years. After the failure of
a 5-year-old reform effort in 2005, the Pentagon came up with an
ostensibly new and improved program it called Financial Improvement and
Audit Readiness (FIAR). After another five years, and at least $5.8
billion more in investment, the DOD had achieved only 10 percent of
FIAR’s objectives, leaving it far behind schedule and above cost. Once
again, in 2010, the DOD tried to resuscitate “reform,” adopting a
Revised FIAR to succeed the original. It also promised to meet a new,
congressionally imposed deadline to produce audited financial
statements by 2017. No one believes that will happen, or has any reason
to. The GAO reported in September 2010:

The
revised FIAR strategy is still in the early stages of implementation,
and DOD has a long way and many long-standing challenges to overcome,
particularly in regard to active and sustained leadership and oversight,
before its military components and the department are fully auditable,
and financial management is no longer considered high risk.

It is not cynical to predict
a FIAR 3 sometime in 2015. It is realistic.

After the
Money’s Gone

From the beginning, defense/security’s excuse consistently has been that it is just too damned big to collect, organize, and review all
the information necessary to create financial statements. Imposing
the requirement on it is unfair. In its 2010 financial report (19-20), the DOD even subtly threatened
that requiring it to produce financial statements is a distraction that
could interfere with “mission requirements:” “The Department’s
enormous size and geographical dispersion substantially complicate the
Department’s financial improvement efforts…. Because of DOD’s size
and mission requirements, it is not feasible to deploy a vast number
of accountants to manually reconcile our books.”

It is probably
true that, somewhere along the way after World War II, the DOD became too large,
diverse, and complex to produce an accurate accounting of all that money
appropriated for it. It is out of control and has been for decades.
It is the preeminent market for “waste, fraud, and abuse.” In comparison with the opportunity
for plunder created by the Pentagon’s systemic derangement, the routine
frauds of a Halliburton or the mysterious disappearance of $12 billion cash
delivered on palettes in the Iraqi desert look like petty theft.

That the DOD
and its affiliates are “too big to possibly get
it right” cannot justify violating a constitutional requirement critical
to maintaining a genuine republic. The Framers could not have
imagined anything approaching the gargantuan American military state of
the 20th and 21st centuries. But they were
attuned to the risk of an overbearing government, one that, like
the monarchies of Europe, held power over its “subjects,” unrestrained
by law and accountability. By imposing the requirement of
a regular statement of account of “all the public money”
as a condition of Congress’ power of appropriation, the Framers did
more than promote government “transparency” and an informed citizenry.
They created a bulwark against unruly government growth.

As things currently
stand, no matter which debt-reduction proposal prevails, the Congress
and the executive will be giving the DOD at least $5 trillion
through 2017, knowing that, under law, the DOD will have not have
to account for it.

Having failed
to give Eisenhower’s famous admonition anything more than lip service,
we are now way beyond the mere specter of a “military-industrial complex.”
The ideological and economic interests in control of the organizations
“keeping America safe” have become the foundation of modern American
governance.

The situation
cannot stand. The real solution is obvious: Defense should immediately
be put on a starvation diet.

Good article, but why does Mr. Casey refer to "defense" throughout? He's writing about an agency designed and executed primarily for offensive purposes. I'm old enough to remember when it was more accurately called "the Department of War"; it was renamed for obvious reasons.
We should be careful of our words. I never–never!–refer to the military as "the service." I never say, "He served in the army" or whatever. It isn't "service" except in the sense that the poor suckers who join serve the corporations and the politicians who are in THEIR service.